Other Countries' Money

But if being in the United States is clearly good for the companies that build their research facilities here, is it good for the host country as well? That question is more difficult to answer.

Critics of foreign investment in U.S. R&D see a threat to American technological leadership by giving international companies easy access to U.S. technology. According to this “technonationalist” point of view, foreign R&D facilities are skeleton operations designed to monitor and pirate American ideas. Thus, this view holds, foreign investment in R&D in the United States should be restricted. Influential exponents of this view include Clyde V. Prestowitz, formerly of the Reagan administration’s Department of Commerce and now president of the Economic Strategy Institute in Washington.

Technonationalism rests on the notion that federal policy-makers can tilt the rules of innovation to benefit American companies over foreign competitors, or develop rules and regulations that reward “good” U.S. companies (those that invest in the United States) over “bad” ones (those that invest abroad). “Technoglobalists” counter that while such policy proposals are well-intentioned and seek to protect American investments, they are completely out of touch with the reality of a global system of innovation. According to this point of view, investments by foreign corporations in U.S. R&D strengthen American science and technology, especially when government and private sponsorship of U.S. research is being cut back. Any attempt to restrict foreign laboratories would therefore cut off a valuable source of R&D investment.

To sort out this issue, we must examine what exactly foreign-owned laboratories produce. Plenty, according to the Carnegie Mellon survey. These labs churn out patents at rates that exceed those of U.S. industrial R&D. Foreign labs in America generated 7.3 patents per $10 million in R&D spending, compared with 4.7 patents per $10 million of company-financed industrial R&D for the U.S. as a whole. In evaluating these figures, keep in mind that foreign labs tend to be engaged in a company’s most patent-intensive activities. The U.S. rate of patents is lower in part because it is based on all industrial R&D, including work such as manufacturing engineering, which often leads to improvements in process technology rather than new products.

Foreign laboratories also add considerably to the stock of new scientific and technical knowledge by reporting their findings in scientific and technical journals. They publish an average of 10 journal articles per 100 scientists and engineers per year, better than the rate for industrial R&D by U.S.-owned companies. Moreover, these labs share their findings with scientists and researchers from other institutions by sponsoring seminars and workshops. One senior American researcher working in a foreign-owned laboratory says the facility is “the most open industrial laboratory I’ve ever worked in.”